Jovanovic, Boyan and Szentes, Balázs (2013) On the market for venture capital. Journal of Political Economy, 121 (3). pp. 493-527. ISSN 0022-3808
Full text not available from this repository.Abstract
We propose a theory of the market for venture capital that links the excess return to venture equity to the scarcity of venture capitalists (VC’s). High returns make the VCs more selective and eager to terminate non-performing ventures because they can move on to new ones. The scarcity of VC’s enables them to internalize their social value, and the competitive equilibrium is socially optimal. Moreover, the bilaterally efficient contract is a simple equity contract. We estimate the model for the period 1989-2001 and compute the excess return to venture capital, which turns out to be 8.6%. Finally, we back out the return of solo entrepreneurs which, regardless of their wealth, is always below that of a VC.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.press.uchicago.edu/ucp/journals/journal... |
| Additional Information: | © 2013 University of Chicago Press |
| Divisions: | Economics |
| Subjects: | H Social Sciences > H Social Sciences (General) |
| Date Deposited: | 14 May 2013 15:10 |
| Last Modified: | 14 Sep 2024 05:50 |
| URI: | http://eprints.lse.ac.uk/id/eprint/50253 |
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